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Die Magie des Al Boraq

Heinrich von Arabien - 15 May, 2019 - 19:51

Er hat seinen Namen redlich verdient, denn er hat etwas Magisches an sich. Der neue TGV-Schnellzug, der seit November 2018 die beiden marokkanischen Küstenstädte Casablanca und Tanger verbindet. Für die gut 350 km braucht er nur noch 2:10 Stunden anstatt 4:45, in denen der alte Zug die Strecke bewältigte.

Vor kurzem bin ich zum ersten Mal mit dem Al Boraq gefahren – so heißt der TGV, benannt nach dem magischen Reittier mit dem Prophet Mohamed seinerzeit in Windeseile von Mekka nach Jerusalem geflogen ist. Und wie fliegen fühlt es sich auch ein bisschen an, wenn der Zug mit über 300 km/h durch die grünen Felder der marokkanischen Küstenebene rast. Nicht dass der deutsche ICE das nicht auch könnte (wenn er sich zufällig auf einer entsprechend ausgebauten Zugtrasse befindet), es ist vielmehr der marokkanische Kontext, der den Unterschied macht – die Kontraste von schnell und langsam sind hier viel stärker. Die Magie des Boraq entsteht gerade durch die Ungleichzeitigkeit von Geschwindigkeit und Entwicklung. Das ist mir bei meiner Fahrt nach Tanger noch einmal sehr klar geworden. Auf den Feldern entlang der Schienen spannen die Bauern noch Pferde vor den Pflug, um ihre Äcker zu bestellen, und bringen ihre landwirtschaftlichen Erzeugnisse mit Eselskarren zum Markt. Während dessen nutzen Geschäftsleute den Al Boraq, um schnell für ein Meeting nach Casablanca zu fahren und vielleicht dabei einen Cappuccino im Bord-Bistro zu trinken.

Auch die Pünktlichkeit des neuen TGV ist phänomenal. Am Unterwegsbahnhof Kenitra mit seiner neu gebauten Bahnhofshalle, die selbst den Flughafen von Rabat alt aussehen lässt, fuhr der Zug während meiner Reise sogar zwei Minuten zu früh ab. Sehr gewöhnungsbedürftig für die marokkanischen Fahrgäste, die bestens mit chronischen Verspätungen vertraut sind. Denn in Sachen Pünktlichkeit kann die marokkanische Eisenbahngesellschaft ONCF es bei den regulären Zügen problemlos mit der deutschen Bahn aufnehmen. Dies ist auch einer der zentralen Kritikpunkte am neuen TGV. Anstatt in den Ausbau des bestehenden Schienennetzes und die Verbesserung der Angebote zu investieren, leistet sich der Staat ein teures Prestigeprojekt – so die Kritiker, die sich auf Facebook und Twitter tummeln.

Der Parlamentsabgeordnete Omar Balafrej kritisiert das TGV-Projekt schon seit Jahren. Anstatt super schnell nach Tanger fahren zu können, setzt er sich dafür ein, weitere Städte jenseits der Ballungszentren an der Küste ans Schienennetz anzuschließen, um ihnen bessere Entwicklungsperspektiven zu geben. Plakativ stellte er deshalb der Regierung mehrmals die Frage, wann denn der Zug in Errachidia ankomme. Bis heute hat die Provinzhauptstadt im Südosten des Landes keine Eisenbahnanbindung und Omar Balafrej keine Antwort auf seine Frage.

Ich fand die Fahrt mit dem Al Boraq trotzdem beeindruckend, auch weil sie mir wieder gezeigt hat, wie relativ Geschwindigkeit ist. Und ich bin pünktlich in Tanger angekommen.

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Categories: Blogs

Farming First: A Recipe to Feed a Crowded World

Triple Crisis - 6 May, 2019 - 18:54

By Timothy A. Wise

Cross-posted at Mark Bittman’s Heated at Medium

One version of an old joke features a shipwrecked economist on a deserted island who, when asked by his fellow survivors what expertise he can offer on how they can be rescued, replies, “Assume we have a boat.” Economists have a well-deserved reputation for making their theories work only by making unrealistic assumptions about how the real world operates.

I was reminded of the joke often in the five years I traveled the world researching my book, Eating Tomorrow: Agribusiness, Family Farmers, and the Battle for the Future of Food. Policy-makers from Mexico to Malawi, India to Mozambique, routinely advocated large-scale, capital-intensive agricultural projects as the solution to widespread hunger and low agricultural productivity, oblivious to the reality that such initiatives generally displace more farmers than they employ.

Where are the displaced supposed to go? “Assume we have employment,” can be the only answer, because economic growth sure wasn’t generating enough jobs to absorb those displaced from rural areas. No one can sail home on an economist’s assumed boat. And assumed jobs wouldn’t address the chronic unemployment and under-employment that characterize most developing countries.

With demographic shifts creating youth bulges, job-creation remains an urgent priority. Indeed, growing populations are often portrayed as a demographic “time bomb,” conjuring images of unemployed youth joining gangs, insurgent groups, or just falling into despair in urban slums.

But what if we saw all those unemployed workers as a resource rather than a curse? Economist Michael Lipton and others have long argued that the bulge in working-age youth can be a demographic dividend rather than a demographic time bomb, but only with policies that focus on creating and rewarding work, beginning with labor-intensive farming in agricultural societies. That is exactly what I see starting to happen in Mexico under its new president.

The Demographic Dividend

Lipton makes what should be an obvious point: labor creates wealth. So a society with a large share of able-bodied workers has a vast resource to generate economic development. The economic success stories in South and East Asia relied on an increase in the number of young people entering the workforce to accelerate economic growth. Lipton estimated that about one-third of the widely acclaimed “Asian miracles” of growth and poverty reduction could be attributed to those countries’ low dependency ratios — the share of the population (children and older people) who don’t work and are therefore dependent on the share of the population who can.

The United States now faces the opposite problem, with baby-boomers collecting their Social Security checks and with fewer workers paying into the government retirement system. But in Africa, low dependency ratios, economically, mean fewer mouths to feed per able-bodied worker. In 2012 there were 120 working-age people for every 100 dependents; in 2050 there are projected to be 196, a 63% rise in workers-per-dependent.

That should be a boon to economic growth, but only if those available workers can be put to productive work. In contemporary Asian success stories, such as China’s, the first place they were put to work was in labor-intensive agriculture, with land reforms that created and supported intensive production on small farms of about two acres each.

Sub-Saharan Africa is the ticking demographic time bomb everyone now worries about; populations are expected to double, or more, by 2050. But that could be a demographic dividend if governments pursue policies that put people to work, first in agriculture. The young will be a resource, not a curse. And bottom-up economic development, particularly if it improves the lives of women and girls, will slow population growth, as it has in other developing countries.

Little Support for Labor-Intensive Agriculture

In my research in Africa, I didn’t see much evidence that governments saw working-age youth as a resource. And they certainly were not investing in the kind of labor-intensive small-scale farming that was the foundation for Asia’s economic miracles. But I saw plenty of examples of farmers taking matters into their own hands and intensifying their own production, generally with scant government support.

Intensification now has a bad name among many sustainable agriculture advocates because the term has become associated with increased use of commercial inputs to raise productivity. Even “sustainable intensification” has been co-opted by advocates of Green Revolution technologies to argue for “sustainable” use of chemicals.

But everywhere I traveled to research Eating Tomorrow, I saw farmers creatively intensifying the farming of their small plots, in truly sustainable ways. Those few who had access to irrigation could essentially double production, growing a second set of crops on the same land by irrigating it in the dry season. Even those who couldn’t irrigate raised goats or other small livestock, composted the manure, and applied it to their fields, increasing soil composition, fertility, and productivity. Farmers inter-planted various food crops with their corn, ignoring Green Revolution monocultures and the bribes –- subsidies for commercial corn seeds and chemical fertilizers –- that backed them up.

Farmers knew when they harvested cowpeas from the same fields from which they had recently picked their corn that they had indeed intensified production –- two harvests rather than one –- from their land. Agricultural economists measure yield as corn-per-acre, not total-food-per-acre, so those shipwrecked economists see intercropped fields as less productive than monocultures. But these farmers know better. And when corn crops fail due to drought or pests, they also know they have grown other foods that survive to sustain their families.

Lipton’s policy advice is to provide public support so small-scale farmers can intensify production, putting all able-bodied family members to productive work. Organic and ecological agriculture, in fact, require more intensive farm management, more labor. If that labor is rewarded with good prices, it can initiate a virtuous cycle of economic development, taking advantage of the productive resource represented by a large working-age population, turning a potential demographic time bomb into a demographic dividend.

Making Rural Mexico Great Again

Interestingly, I now see such policies being implemented in Mexico, 25 years into the rural disaster that the North American Free Trade Agreement (NAFTA) helped create. The new approach comes from the government of Andrés Manuel López Obrador, who was swept into office last year in a landslide of discontent with Mexico’s corrupt leaders and their failure to sustain a decent standard of living for the majority of Mexicans.

In 1994, NAFTA opened the floodgates to cheap, subsidized U.S. corn, wheat, soybeans, and other crops, inundating rural Mexico. Corn imports jumped fivefold, driving local corn prices down by two-thirds. Some five million able-bodied workers fled rural Mexico, and they did not find waiting for them any of the job’s NAFTA’s economists had assumed would materialize. Some ended up as seasonal laborers on Driscoll’s strawberry farms in Northern Mexico. Others swelled city slums. Many risked the increasingly dangerous crossing to seek work in the United States. Most sent money back home so the family could keep its farm, often its only asset.

Today, an embarrassing 57 percent of Mexico’s able-bodied workers are in the informal sector, the broad category of off-the-books work ranging from street vending to drug trafficking. That is a higher share than before NAFTA. Clearly, Mexico hadn’t put its able-bodied people to productive work to jumpstart economic development.

The new López Obrador administration, however, seems determined to make rural Mexico great again by investing in the productivity of the country’s family farmers in the most neglected areas of the country. The leader of his new Office of Food Self-Sufficiency, veteran farm leader Victor Suárez, has ambitious programs underway to reinvigorate rural economies by paying support prices for key food crops –- corn, beans, wheat, rice, and milk –- and using that public procurement to provide high-quality foodstuffs to schools, hospitals, and other public institutions and to the poor. A host of other policies, such as a massive agro-forestry program, aim to invest in soil fertility and sustainable resource use on the country’s small farms.

If that approach sounds familiar, it should. It is exactly what the U.S. government did in the Great Depression, and it is part of what won Brazil’s “Zero Hunger” campaign international recognition. It is the cornerstone of India’s National Food Security Program, which I document in my book.

In Mexico, López Obrador says that the explicit goal is to eliminate the root causes of rural outmigration and illicit drug trafficking. In other words, echoing Lipton, to create dignified work in agriculture to turn Mexico’s chronic youth unemployment into a demographic dividend.

Timothy A. Wise directs the Land and Food Rights Program at the Small Planet Institute in Cambridge, Mass. He is the author of the recently released Eating Tomorrow: Agribusiness, Family Farmers, and the Battle for the Future of Food (New Press, 2019), available wherever books are sold.

 

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Categories: Blogs

Italy and China’s One Belt One Road Initiative

Triple Crisis - 30 April, 2019 - 21:15

By Sara Hsu

China has become a leader in globalization, most visibly through its One Belt One Road initiative, which spans several continents and aims to build up infrastructure and trade between China and the rest of the world. While the program has, for the most part, remained controversial in the West due to a fear of Chinese imperialism, in March 2019, Italy broke with the G7 major economies and signed up for the program. Some analysts have expressed concerns that this move will allow China a back door into Europe’s heartland, while others see it as a shrewd move on the part of the Italians, allowing them to obtain much-needed financing for a number of endeavors. So, which is it, and is this a win-lose or a win-win situation?

Italian-Chinese agreement

A few details first. Italian leader Deputy Prime Minister Luigi Di Maio signed a memorandum of understanding of cooperation between the two nations. The MOU states, “the Parties will work together within the Belt and Road Initiative (BRI) to translate mutual complementary strengths into advantages for practical cooperation and sustainable growth, supporting synergies between the Belt and Road Initiative and priorities identified in the Investment Plan for Europe and the Trans-European Networks, bearing in mind discussions in the EU China Connectivity Platform. This will also enable the Parties to enhance their political relations, economic ties, and people-to-people exchanges.” Economic benefits have been a focus of the BRI. Di Maio views the agreement as a means to correct the trade imbalance between two countries by shipping more Italian-made goods to China.

Under the collaboration, the nations agreed upon a $2.8 billion package that included 29 deals. The deals targeted a variety of sectors, including energy, finance, agriculture, and infrastructure. Luxembourg soon after followed suit, signing an accord that endorsed the Belt and Road Initiative. The agreements boost China’s reputation as a leader of economic globalization, as Western Europe joins countries from Central and Eastern Europe, Asia, and Africa in participating in infrastructure projects with the Middle Kingdom.

Winners and losers

In this deal, if there is any winner, it is China. Italian involvement in Xi Jinping’s flagship program gives the Chinese leader “face” and signals to the rest of the G7 that Chinese influence is potentially welcome everywhere. China has been racking up signatories to the program in almost every continent. The appeal is cheap loans, skilled Chinese labor, and the potential for long term returns on investment. China helps to build up infrastructure, such as bridges, roads, and ports, that can help countries improve their economic circumstances.

Some in Italy also view the deal as beneficial. With high levels of debt and recent experience with recession, Italy has struggled to improve its economic performance amid a backdrop of slow Eurozone growth. Politics has played a role in maintaining debt costs, as Italy and the European Union locked horns over increasing Italy’s budget deficit and implementing a fiscal stimulus plan. The dispute ended up driving up Italy’s borrowing costs before an agreement was reached at the end of 2018.

However, major Western powers disagree that joining the One Belt One Road project will help Italy. Rather, countries like the US see the move as a means for China to penetrate national security barriers and engage in debt trap diplomacy. The latter charge stems from China’s tendency to finance BRI projects through loans. The European Commission remains wary of the Asian nation. In a Strategic Outlook publication, the European Commission called China “an economic competitor in pursuit of technological leadership and a systemic rival promoting alternative models of governance.”  China has been viewed poorly due to it state subsidies for traded goods and government involvement in the technology sector, which could provide a gateway to Chinese spying.

Complicating matters, not all top Italian officials agree that the deal is good for Italy. Even Di Maio’s own coalition partner, the far right League, has sought to uphold strong relations with the US, which has been involved in a trade war with China under the Trump administration. Italian opposition parties have opposed any deal between China and Italy on the grounds that it could harm Italian industry.

Europe against Chinese practices?

French President Emmanuel Macron wants to unite Europe against unfair Chinese trade and investment practices. Macron stated on March 25 during a visit from Chinese President Xi Jinping that fair competition between European and Chinese firms should be a goal, and that BRI projects must meet international norms. Despite this talk, France and China signed 15 business deals in the amount of 40 billion euros ($45 billion) to further the economic interests of both sides.

Measures of success

The conclusion is not simple, as there may be different measures of success for such a collaboration. One measure is simply Italy’s growth that arises from the program. Will the deals made be fruitful, and how significant will the gains be? Another measure is whether there really will be security costs associated with the deals. Will China truly have the ability to access Western Europe’s private economic and social networks due to the cooperation, or is this just Sinophobia? Finally, there is a question of who will gain or lose due to the partnership-for example if there are jobs or contracts lost or gained as a result.

In this globalized world, relationships are complex. China is working to expand outward by recognizing that other nations have economic needs that they cannot easily fulfill themselves. Whether the China’s partnerships with other nations are fair or will make economic and political sense in the long run has yet to be seen, but they remain contentious among Western critics.

Sara Hsu is an assistant professor of economics at the State University of New York at New Paltz. Her research interests include the Chinese economy, financial flows, and the international economy.

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Categories: Blogs

Bayer-Monsanto: Der eigentliche Skandal ist nicht der Gewinneinbruch

Baustellen der Globalisierung - 29 April, 2019 - 13:09
Es war schon eine kleine Sensation, als die Aktionärsversammlung des Bayer-Konzerns dem Vorstand am letzten Freitag die Entlastung verweigerte, zum ersten Mal in der Geschichte eines Dax-Konzerns. Anlass war der Gewinneinbruch infolge der Übernahme des Düngemittel- und Saatgutunternehmens Monsanto. Die Verweigerung ist zwar rechtlich ohne Folgen, denn der Aufsichtsrat sprach dem Bayer-Vorstand sein volles Vertrauen aus. Interessant ist der Fall dennoch: Wäre die Monsanto-Übernahme nämlich betriebswirtschaftlich reibungslos verlaufen, wäre der Zwergenaufstand wahrscheinlich ausgeblieben, auch wenn die gesundheitlichen, ökologischen und menschenrechtlichen „Nebenwirkungen“ der Monsanto-Produkte vergleichbar gewesen wären.

Dabei versucht die deutsche Bayer-AG mit allen Mitteln, den Verkauf hochgefährlicher Pestizide und gentechnisch veränderten Saatguts weltweit zu steigern und nimmt dafür gezielt auf staatliche Behörden Einfluss. Das zeigt eine neue Broschüre von Misereor und inkota mit dem Titel „Advancing Together? Ein Jahr Bayer-Monsanto: Eine kritische Bilanz“. Den Nachhaltigkeitsversprechen des Bayer-Konzerns stehen Fallbeispiele aus Argentinien, Brasilien, Indien und dem südlichen und östlichen Afrika gegenüber. Diese zeigen, dass der neue Megakonzern Umwelt und Menschenrechte gefährdet und der Umsetzung der UN-Entwicklungsziele (SDGs) entgegenwirkt.
Gravierend ist die Situation insbesondere in Ländern des globalen Südens, so die Autor*nnen. Die Schädlichkeit von Glyphosat und anderen Pestiziden für Menschen und Umwelt würde nur minimal geprüft. Entsprechend schwach seien die Hürden für die Zulassung von Pestiziden und die Regulierung von deren Anwendung. Alan Tygel von der brasilianischen Kampagne gegen Agrargifte und für das Leben kommentiert: „Die Strategie von Agrarkonzernen wie Bayer ist immer dasselbe: Zuerst machen sie mit ihren Produkte Profite in den reichen Ländern. Wenn diese die Produkte verbieten, ziehen sie in ärmere Länder, wo die Konzernlobby mehr Einfluss auf die Aufsichtsbehörden ausüben kann.“ Diese Taktik funktioniere: Bayer vertreibt in Brasilien heute 50% mehr Wirkstoffe, die in der EU verboten sind, als noch 2016.

Auch das umstrittene Projekt WEMA („Water-efficient Maize for Africa“), ursprünglich von Monsanto, wolle Bayer fortführen. Im Rahmen der Initiative wird der angeblich dürreresistente Monsanto-Genmais der Sorte MON87460 auf Testfeldern in Kenia, Mosambik, Südafrika, Tansania und Uganda angebaut. Doch mit der Weiterführung von WEMA ignoriert Bayer nicht nur Regierungsbeschlüsse aus Südafrika und Tansania, sondern auch die Kritik aus der Zivilgesellschaft an der weiteren Verbreitung von gentechnisch verändertem Mais. Monsantos Genmais weise in puncto Dürreresistenz kaum oder keine Vorteile gegenüber herkömmlichem Mais auf, zudem häufen sich die Indizien von resistenten Stängelbohrer-Motten in Südafrika.

Bayer ist bewusst, sagen die Autor*innen, dass seine Pestizide in vielen Fällen ohne die nötigen Vorsichtsmaßnahmen eingesetzt werden. Die sichere Anwendung ist ein Mythos, insbesondere im globalen Süden. Das Risiko für die Gesundheit von Millionen Bauern, Bäuerinnen sowie Plantagenarbeitern und -arbeiterinnen hält Bayer jedoch nicht von der Vermarktung hochgiftiger Pestizide ab. Im Gegenteil vermarkte das Unternehmen seine Pestizide zum Teil mit doppelten Standards. Um seine Profite zu steigern, nimmt Bayer Menschenrechtsverletzungen offensichtlich in Kauf und missachtet internationale Verhaltensregeln.
Categories: Blogs

Trotz Kritik: Seidenstrassen-Initiative gewinnt an Schwung

Baustellen der Globalisierung - 26 April, 2019 - 12:44
Während die Trump-Leute sich auf die Seidenstraßen-Initiative (engl. Belt and Road) einschießen und auch in Europa Kritik und China-Bashing sich Gehör verschaffen, nehmen anderswo die positiven Bewertungen zu. Kurz vor seiner Abreise zum 2. Belt-and-Road-Forum in Peking, an dem derzeit mehr als 40 Staats- und Regierungschefs teilnehmen, bezeichnete UN-Generalsekretär Antonio Guterrez die chinesische Initiative als „sehr wichtige Gelegenheit“. Die Seidenstraßen-Initiative könne ein sehr wichtiges Instrument sein, um den Klimawandel zurückzudrängen. „Wir brauchen eine Menge an Investitionen in nachhaltige Entwicklung, in erneuerbare Energien und in Infrastruktur, die die Zukunft respektiert und wirklich nachhaltig ist“, so der Generalsekretär.

Alles was dazu beiträgt, verschiedene Länder zu verbinden, so Guterrez, erleichtere den Handel. Informations- und Wissensaustausch stellen einen wichtigen Beitrag zu einer fairen Globalisierung dar. „Das ist genau die Gelegenheit, die Belt and Road repräsentiert.“ Auf dem derzeitigen Forum sollten die positiven Implikationen der Initiative diskutiert und maximiert werden.
Einer der Hauptstreitpunkte in der Auseinandersetzung um die Seidenstraßen ist die Frage, ob damit nicht die Gefahr einher geht, dass die Partnerländer durch hohe Kreditaufnahmen in „Schuldenfallen“ geraten. Auf dem kürzlichen World Economic Forum zu Nahost und Nordafrika in Jordanien überwogen jedoch die Stimmen, dass dies nicht der Fall ist. Li Chengwen vom chinesischen Außenministerium besteht darauf, dass „China versucht, Wege zu finden, um die ‚Schuldenfalle‘ zu vermeiden. Kein Land habe bis heute beklagt, in die ‚Falle‘ nicht-nachhaltiger chinesischer Kredite getappt zu sein. Auch den Geopolitik-Vorwurf weisen die Chinesen zurück: „Die Belt-and-Road-Initiative zielt darauf, das wirtschaftliche Wohlergehen der Länder zu verbessern. Sie zielt nicht auf die Ausweitung der politischen und geographischen Autorität Chinas in der Welt“, so Li.
„Wenn man an seinen Interessen festhält, wird man in China keinen unfairen Partner finden“, sagt z.B. Shandana Gulzar Khan vom pakistanischen Handelsministerium. „Doch es hängt davon ab, wie gut man seine Hausaufgaben gemacht hat.“ Ein anderes Argument führte in Amman He Wenping von der Chinesischen Akademie für Sozialwissenschaften (CASS) ins Feld: „Die größte Angst vor der ‚Schuldenfallen-Diplomatie‘ sollte von China selbst kommen. Es geht um chinesisches Steuerzahler-Geld.“ Schon deshalb verbiete sich, die ‚China-First‘-Flagge zu schwenken.
Eine erstaunliche Offenheit zeigen die chinesischen Vertreter auf den derzeitigen Forum in Peking gegenüber der Notwendigkeit, mögliche Schuldenprobleme von Entwicklungsländern frühzeitig einzuschätzen und zu vermeiden. Darin wurden sie sogar von IWF-Chefin Christine Lagarde gelobt. Das Forum soll eine 2.0-Phase von Belt and Road einläuten. Es könnte also sein, dass die Initiative erneut Fahrt aufnimmt, ungeachtet der konkurrenz- und neidmotivierten Kritik aus dem Westen.
Categories: Blogs

China Has Strategic Objectives In Going Global, Does Africa?

Triple Crisis - 25 April, 2019 - 20:53

From The Real News Network.

If Africa as a continent does not have strategic objectives of its own, the history of impediments to African economic development will be repeated in its engagement with China, says Ethiopia’s Alemayehu Geda.  

LYNN FRIES: It’s The Real News. I’m Lynn Fries. My guest on today’s show is Ethiopia’s Alemayehu Geda, who is a Professor of Economics at University of Addis Ababa. We are meeting at the UN Geneva, where Professor Geda just presented at anexperts meeting. Professor Geda, welcome.

ALEMAYEHU GEDA: Thank you very much.

LYNN FRIES: The formal title of your presentation was THE ELUSIVE QUEST FOR STRUCTURAL TRANSFORMATION & JOB CREATION IN AFRICA – WILL CHINA MAKE A DIFFERENCE. Start by commenting briefly on the underlying topic, that the reshaping of the global economy has major implications for Africa.

ALEMAYEHU GEDA: Historically Africa has been trading and in terms of finance engaging with today’s developed countries, the western economies of Europe, North America, and Japan, so basically OECD countries. But in the last 15 years the pattern of African trade and African finance is changing from the traditional partners to new partners, China, India, Brazil, and to some extent also Russia. So this is an emerging pattern, and it’s very important for African countries to understand it and also strategically think about it.

LYNN FRIES: Here’s a clip from some of your opening comments at the expert meeting where you provide some context on all this.

ALEMAYEHU GEDA: In the last decade African growth has been very good, over 5 percent per annum for nearly a decade. This growth is primarily driven by high commodity prices. And the demand for that comes from emerging economies in general, and China and India in particular. It has obvious significant implications for structural transformation in the continent. Starting in 2003 up until 2013, for the first time the terms of trade of Africa is getting better, reversing, perhaps, the 100 years of deterioration of terms of trade by about 0.8 percent per annum thanks to this commodity price. And in particular the engagement of China in Africa became huge. Like if you compare from mid-1990s to 2016, the trade between China and Africa increased by about 66 times, from $3 billion to over $200 billion now. And in terms of finance also, Chinese finance is overtaking traditional financiers in Africa. This takes both foreign direct investment (FDI) and also credit from EXIM (Export/Import) bank of China. FDI is not that important compared to traditional financiers. Chinese FDI in Africa in terms of stock is not more than 4percent. Still, the Western economies are dominant in terms of stock of FDI. However, in terms of credit finance coming from the EXIM bank of China is becoming very important. It is estimated it could be about over $100 billion right now. And this is going invariably to the infrastructure sector, and the resource sector, and not only that, it is focused also in a few countries.

LYNN FRIES: What are some of the main characteristics, as you see it, in this engagement between Africa and China?

ALEMAYEHU GEDA: There are three channels through which African countries are engaging within China. One is trade, basically. Africans in general sell primarily commodities, unprocessed primary commodities like oil, copper, and what have you, this kind of mineral resources, and the Chinese are selling manufactured goods. So basically one of the characteristics of this trade is the Chinese are selling manufactured processed commodities, manufactured goods, while the Africans are selling primary commodities. Second characteristic is there is a significant inflow of capital from China to Africa. And you know, traditionally with the industrialized countries of the West it used to be foreign direct investment. Foreign direct investment means, you know, a company from Europe or North America comes to Africa, sets up a company, and they control the management and do their business. But with China it is different. Although they have foreign direct investment it is not that important. Like, from the total stock of foreign direct investment in Africa, which is over$557 billion, the share of China is just $17 billion, which is about 4 percent.

But there is a different finance coming from China. We can call it quasi-FDI. It is not really foreign direct investment. It is quasi-FDI, or credit financing, or sometimes they call it vendor financing, which means basically it is the African country who is doing the job or the investment. But the money for that comes from China, EXIM bank, usually. But there are also other development banks from China, but the EXIM bank is the dominant one. And how different is this from foreign direct investment? Well, the investment, to begin with, is owned by African countries. Second, relative to traditional finance that we used to get from development partners, it is a little expensive. I think that’s what characterizes the finance and trade.

LYNN FRIES: On the issue of how credit finance from the EXIM bank of China is becoming very important in Africa, what do you mean when you talk about bundling in the context of Chinese transnational corporations and the export-import bank of China?

ALEMAYEHU GEDA: The Chinese government has a policy for its companies, multinational companies. As you know, Chinese have both private and public multinational companies. And their strategy was what they call it – going global. They have a strategy called going global. That means the government of China encourages its firms to go global, strategically engage with any country. And as part of that incentive, these companies can get money from the Chinese government to do their business. Now, therefore, when they came to a particular African country, they could be interested in trade. Say they can come to South Sudan or Sudan and then they want to trade oil. For instance,Sudan, before it split into two, used to import 90 percent of its oil to China. OK? So basically they came with trade. But that trade could be facilitated if there is finance for the firms that extract oil. Therefore the EXIM bank of China will give them that finance that is required to do this trade.

And sometimes, although it’s not significant, that finance could have also some aid part. It’s not significant. We did a study on Madagascar and Ethiopia and the share of pure aid is just less than 1 percent in this country. So it’s not significant, but there is aid in it. So there is credit finance in it. But primarily it’s coming to support the Chinese multinational while engaging, say, in the Sudanese oil sector. That’s why I say that now trade, finance, and aid is bundled to have the strategic objective of going global from China’s point of view. That’s what I mean when referring to bundling.

LYNN FRIES: In the case of Africa, what do you see as key challenges and opportunities that have been put into play on the back of China’s strategic objectives of going global?

ALEMAYEHU GEDA: The coming of China to Africa is an opportunity in the sense that the Chinese way of growing in the last 20 years by close to 10 percent per annum, and that creates a huge demand for resources, which Africa is capable of supplying. And as a result, from 2002 until 2013 the global commodity price has increased, primarily because of the Indian and Chinese demand for these commodities. And this is an opportunity because the terms of trade of Africa, African primary commodity prices if you compare it with manufactured goods that Africa is importing, had been deteriorating for the last hundred years. It’s only starting in 2002 that it started to go up, and this is because of China. So this is a good opportunity.

Second opportunity, the Chinese are building a lot of infrastructure in Africa, and Africa has a huge infrastructure deficit. And this is an opportunity. The third opportunity is that the Chinese have a new policy called rebalancing, which means they want to focus now their growth to be based domestically instead of the export orientation they had before, or outward orientation they had before. Now they want to do it more domestic, depend on domestic investment, depend on domestic consumption growth. So this is what they call rebalancing. And also they want to go up on the manufacturing ladder to more skill-intensive, technological-intensive production of goods and services. Also there is a possibility that some of the low labor-intensive goods producing firms might be relocated to other developing countries, because wages in China are growing. Now the average wage in China is becoming about $500-$600 dollars. And if you happen to move to Ethiopia, for instance, the average wage that you pay is about $40. So this huge opportunity for the Chinese. But for Africa this is also a good opportunity, because it is estimated about 85 million jobs, firms that created about 85 million jobs in China are moving to developing countries, and Africa can have a part of that share. So these are the opportunities. Shall I go to the challenges?

LYNN FRIES: Please do. Yes.

ALEMAYEHU GEDA: Yeah. The challenge is that the Chinese, when they come to Africa – for that matter, when the Chinese go to developed countries or developing countries – they have a strategy. They know what they want. But when it comes to Africa we do not have a strategy on how to engage with them. Can we leverage this deal for our benefit? Can we tell them to go to a particular sector in which we have a comparative advantage, and in which we can create a lot of jobs, and after this we can reduce poverty? Not really. Why? Because we don’t have the institutional and human capital to do that. To do research, to negotiate with them, to direct them, to follow them during implementation to make sure that there is technological transfer during this process. So I mean, to my knowledge, except probably in South Africa, we don’t have that kind of systematic engagement with China. That is, I think, the danger, the challenges that Africans are facing.

LYNN FRIES: What kind of strategic policy response do you think should be pursued by Africa in relation to China?

ALEMAYEHU GEDA: It should be multifaceted to begin with. It shouldn’t be locked to a particular country. It should be coordinated. I can think of two channels. One is the African Union, the Economic Commission for Africa. These are continental organizations. They were supposed to do research, engage African governments to strategically think about engaging with emerging economies in general, and China in particular. Or for that matter, even with the West in general. So probably one channel I can think of to use is the A.U., the African Union, the Economic Commission for Africa, to have a collective, coordinated, continental strategy.

The second channel is using the building block for the Africaneconomic community that the AU is envisaging, is what we call a Regional Economic Community. So the West African have the West African Economic Union. If you come to East Africa we have the East African Economic Community. If you go to Southern Africa we have the SADC, or the Southern Africa Development Community, and in North Africa we have the Maghreb Union. So probably each of these RECs, or Regional Economic Communities, need to come up with a regional engagement strategy. And their individual countries need to pay homage to this agreed strategy when they design their own policy. Otherwise, you know, if every country is competing for the resources and markets and opportunities coming from China, it will definitely lead to a race to the bottom. And for that, probably, my suggestion is to first have an engagement strategy. Do it in a coordinated manner. If you want to use the existing institution one possibility is to use the African Union and Regional Economic Communities.

LYNN FRIES: We should note that in Q&A at the expert meeting, the notion of ‘kicking away the ladder’ that’s been climbed to economic success, not only in the United States and every other developed country throughout history, but by China, was raised as an example of the kind of impediments to economic development facing African and other developing countries today.

ALEMAYEHU GEDA: Actually, you don’t even have to go to history. You just can think of the Trump administration, which basically has this protectionist stance in its policy. So definitely if you go in the history books, we knew that when Europe developed and when the Americans developed their economy they were protectionist. And a famous American economist called Carey was against the import of commodities from the British. And he explicitly said – he was an adviser of one of the American presidents [Chief Economic Adviser to U.S. President Abraham Lincoln] 150 years ago – and he said if we don’t protect the American economy we end up being primary commodities forever for British interests. But see, once they pass that stage, they don’t allow us, they don’t allow African countries, to do it because the West wants the African countries to liberalize.

Now, come to China. I mean, for me there is no fundamental difference between the East and the West. Every nation has its own interest. So it’s not their fault, actually, the Chinese or the Americans or the Europeans. It’s not their fault. It’s the Africans’ responsibility, because we have to see that history, that when these guys developed they have interventionist governments, they have protectionist governments, they were planning everything. And I think Africans also need to do that. Now, these days we have to do it in a coordinated manner, because you cannot do it by yourself. So be it China, or dealing with China or the East or the West, I think the market cannot deliver what you want. Free market cannot deliver what you want. You have to guide the market. That basically means you have to have a government that strategically thinks. And to do that you have to have, as I said earlier, the human and institutional capability to do that. If you don’t do that you end up repeating … the relationship that Africa has with the West will be repeated with China, probably.

LYNN FRIES: Specifically drawing from Ethiopian history and the seminal thinkers among Ethiopia’s economists, whose shoulders can you stand on today as a contemporary Ethiopian economist?

ALEMAYEHU GEDA: Historically in 1920 there was this famous economist, it’s my favorite, called Gebrehiwot Baikedagn. A hundred years ago he did an empirical analysis of the relationship between Europe and Ethiopia. And he showed a hundred years ago that the terms of trade of Ethiopia vis-a-vis Europe is deteriorating because Ethiopia is selling primary commodities while importing manufactured goods. And he said unless we industrialize by protecting our markets, we will end up poor for the foreseeable future. And it was prophetic. A hundred years down the line, we still didn’t manage to realize his policy recommendations.

And there were great economists in Ethiopia. We call them actually – in the ‘30s there were about four or five of them – we call them the “Japanesers” in Ethiopia. That’s in 1920 to 1930.Because they were advocating for a Japanese way of developing, which means basically take the knowledge, the skill from Europe and North America, from the West, but domesticate it to your own interests, within your cultural setup. And they usually take Japan as their model, and in Ethiopian economic history we usually call them the Japanesers.

LYNN FRIES: Alemayehu Geda, thank you.

ALEMAYEHU GEDA: You’re welcome. I enjoyed it.

LYNN FRIES: And thank you for joining us on The Real News Network.

Categories: Blogs

Fangfrisch aus dem Abwasser

Heinrich von Arabien - 23 April, 2019 - 21:09

Ungewöhnliche Professionen haben es mir angetan. Im Libanon habe ich davon noch nichts so ausgefallenes wie in Afghanistan den Matratzenaufplusterer erlebt. Aber was ich in Beirut herablassend als dekadent zu umgehen versuche und andernorts vermissen werde, ist der „Valet-Parker“. Valet-Parker machen aus der Parkplatznot eine Tugend, oder vielmehr ein Geschäft. Statt mühsam um den Block zu kurven, hält man einfach direkt vor der Tür, gibt ihnen den Autoschlüssel und lässt sich das Auto später wieder vorfahren. In Deutschland undenkbar (Versicherungsfragen!), hier etwas, was zum Service eines Restaurants oder eines Ladens dazugehört.

Das ist charmant, wenn man von dem mit ein paar Euro entlohnten Service profitieren kann, und fatal, wenn man das Pech hat, dort zu wohnen, wo andere ausgehen, denn gegen Anwohner verteidigen die Valet-Parker „ihr“ Territorium mit Zähnen und Klauen. Wer sein Auto nicht rechtzeitig am frühen Abend wegfährt oder gar darauf beharrt, es dort stehen zu lassen, findet es nicht selten mit Kratzern im Lack oder platten Reifen wieder. Der öffentliche Raum in Beirut ist nur solange auch zugänglich für alle, wie ihn keine der oft mafia-ähnlichen Gewerbegruppen für sich in Beschlag nimmt.

Manchmal versuchen die Valet-Parker es mit Ausreden. Als meine Kolleginnen neulich vor dem Büro parken wollten, hieß es, das Gebäude gegenüber sei einsturzgefährdet. Dieser Balkon … sie haben trotzdem dort geparkt und gleich am nächsten Tag sahen sie, wie der gleiche, der sie mit Sicherheitsbedenken hatte abweisen wollen, selbst dort parkte. Ich wurde unlängst von Taxifahrern gedrängt, ihnen meinen gerade gefundenen Parkplatz zu überlassen. „Aber hier steht kein Schild, dass das für Taxis reserviert ist.“ Murrend verzogen sie sich; später stellte ich fest, dass die Kühlerhaupe eine gehörige Delle aufwies und die Zierleiste der Motorhaube gebrochen war. Beweisen kann ich es nicht, aber in meiner Fantasie sehe ich den Korpulentesten unter ihnen, wie er sich, kaum dass ich um die Ecke bin, auf den Kühler schwingt. Elefanten sitzen vielleicht nicht auf Autos, aber übellaunige Taxifahrer vielleicht schon.

Wer sein Auto einem Valet-Parker anvertraut, zahlt nicht die städtischen Parkgebühren. Die Parkprofis bewegen die Autos ständig, und statt der Polizei ein Dorn im Auge zu sein, sieht man beide oft in kleine Schwätzchen vertieft – es ist anzunehmen, dass es da Übereinkommen finanzieller Art aber auch bezüglich des Informationsaustauschs, wer sich in der Nachbarschaft aufhält, gibt.

Valet-Parken gehört so sehr zu Beirut, dass es die Miniaturausgabe dessen selbst in einer der luxuriösen Kindergeburtsagsfeierstätten gibt. In diesem Indoor-Spielplatz, der einer Stadt mit Banken und Einkaufszentren darstellt, spielen Kinder Erwachseneneleben nach, und können ihre als Porsche designten und natürlich elektrisch betriebenen Kettcars für den Frisör- oder Restaurantbesuch einem Profiparker überlassen.

Den Autos gehört die Straße, den Valet-Parkern der Parkstreifen und die zweite Reihe, und obendrein erweitern viele kleine Restaurants ihren Geschäftsraum damit, dass sie den Bürgersteig für sich abzäunen und Tische dort plazieren. Nicht einfach, mit einem Kinderwagen hier unterwegs zu sein. Nette Kellner springen stets herbei, um mir und meinen Kindern die Stühle aus dem Weg zu räumen, weniger nette scheuchen uns auf die Straße. Auch die Gäste haben oft wenig Verständnis dafür, wieso wir „mitten durchs Restaurant“ fahren. Ich war neulich geradezu entzückt, als mein Sohn sich nach einer besonders unwirschen Frage, was er auf seinem Roller zwischen den Tischen mache, zu mir umdrehte und lautstark fragte, ob ich hier neulich diese beeindruckend große tote Ratte hätte liegen sehen. Sein Bruder reckte sich mit leuchtenden Augen aud dem Buggy und krähte: „Ratte? Wo? Kann ich die noch mal sehen?“ Obwohl der besagte Rattenkadaver vor der Polizeistation gelegen hatte, konnte ich es mir angesichts der schreckensgeweiteten Augen der Speisenden nicht nehmen lassen, meinen Blick unter den Tischen schweifen zu lassen und bedauernd zu bekunden, mittlerweile hätte man sie bestimmt weggeräumt, aber morgen hätten wir bestimmt mehr Glück.

Lieber sind mir da schon andere, die kreative Geschäftsmodelle entwickeln. Neulich kam ich an der Strandpromenade Beiruts entlang, und direkt vor mir kletterte ein Mann im Taucheranzug über das Geländer und überquerte die Straße. An seinem Gürtel zappelten ordentlich aufgereihts silbrige Fische. Der Gute hatte die Taucherflossen unter den Arm geklemmt, und machte sich lediglich auf Socken auf den Weg durch die Straßen, um die Fische anzubieten. „25.000 Pfund nur,“ pries er an, „mit dem  Speer gefischt. Fangfrisch.“ Angesichts der Wasserqualität direkt vor Beirut drehte sich mir der Magen um. Das Personal des nahe gelegenen Hotels scharte sich jedoch interessiert um den Mann.

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Categories: Blogs

Schrumpfende Entwicklungshilfe... Andere Schwerpunkte?

Baustellen der Globalisierung - 12 April, 2019 - 10:34
Nach der neuesten ODA-Statistik der OECD war die Öffentliche Entwicklungshilfe im letzten Jahr erneut rückläufig. Insgesamt fielen die entwicklungspolitischen Finanzleistungen 2018 gegenüber 2017 um 2,7%. Gegenüber den am wenigsten entwickelten Ländern (LDCs) war der Rückgang mit 3% durchschnittlich noch stärker. Afrika erhielt 4% weniger; die Leistungen für humanitäre Hilfe fielen sogar um 8%. Der Abwärtstrend betrifft auch die Bundesrepublik Deutschland. Hier lag die ODA-Quote, also der Anteil der Öffentlichen Hilfe am Bruttonationaleinkommen (BNE) 2018 bei nur noch 0,61%; 2017 waren es noch 0,67%.

Die schrumpfenden ODA-Leistungen hängen zwar auch mit einer restriktiveren Flüchtlingspolitik zusammen. Die Inlandsaufwendungen für Flüchtlinge hatte die Bundesregierung in den vergangenen Jahren dazu benutzt, um die ODA-Zahlen schönzurechnen. Dennoch ruft die negative Entwicklung erneut die NGOs auf den Plan, die zu Recht beklagen, dass Deutschland und viele andere Industrieländer ihrer internationalen Verantwortung nicht gerecht werden. Auf 4 Mrd. € beziffert der Dachverband VENRO die ODA-Finanzierungslücke bis zum Ende der laufenden Legislaturperiode, wenn das 0,7%-Ziel, wie es auch im Koalitionsvertrag steht, erreicht werden soll und die nachhaltigen Entwicklungsziele (SDGs) nicht scheitern sollen.
Es geht jedoch nicht nur um mehr Geld. Deshalb ist es zu begrüßen, dass Oxfam jetzt mit einer neuen Studie, Hitting the target. An agenda for aid in times of extreme inequality, herauskommt. Um die globale Armut zu überwinden, müssen die Industrieländer außerdem in der Entwicklungspolitik andere Schwerpunkte setzen, heißt es darin. Oxfam fordert von den Geberländern, sich in der Entwicklungszusammenarbeit auf Maßnahmen zu konzentrieren, die dazu beitragen, die soziale Ungleichheit zu verringern, weil diese der Überwindung von Armut im Wege steht. Dazu gehört insbesondere,
* den Aufbau guter Regierungsstrukturen in Partnerländern intensiver zu fördern, um vor Ort die Steuereinnahmen zu erhöhen, statt zunehmend Gelder für die Unterstützung entwicklungspolitisch zweifelhafter Privatinvestitionen aufzuwenden;
* zivilgesellschaftliche Organisationen, insbesondere Frauenrechtsorganisationen, stärker zu unterstützen;
* mehr Mittel für Bildung, Gesundheit und soziale Sicherung bereitzustellen, die erwiesenermaßen helfen, soziale Ungleichheit zu verringern. Investitionen in diesem Bereich retten Leben und führen zu mehr Geschlechtergerechtigkeit, doch gerade hier ist die weltweite Finanzierung seit 2010 zurückgegangen. Zudem müsse die Entwicklungspolitik konsequent auf die Überwindung von Armut und Ungleichheit ausgerichtet sein, statt eigene wirtschafts- und sicherheitspolitische Interessen in den Vordergrund zu stellen.
Categories: Blogs

IWF/Weltbank-Tagung in Washington: Bad Governance

Baustellen der Globalisierung - 10 April, 2019 - 11:39
Erst kam Anfang der Woche der ‘Tiger’-Index von Financial Times und Brookings mit der Diagnose, dass sich die Weltwirtschaft in einem “synchronisierten Abschwung” befindet. Dabei steht die Abkürzung ‚Tiger‘ eigentlich für ‚Tracking Index of global economic recovery‘. Doch von einem globalen Wirtschaftsaufschwung kann derzeit nirgendwo die Rede sein. Zum wiederholten Male hat der IWF in seinem jüngsten World Economic Outlook die Wachstumsprognosen nach unten korrigiert. Verglichen mit den Prognosen vom letzten Oktober sind die Vorhersagen rückläufig, mit der einzigen Ausnahme von China, dessen Wachstum 2019 wieder leicht zulegen dürfte. Eine schwache Hoffnung ist es da, wenn die IWF-Ökonomen darauf spekulieren, dass die wirtschaftliche Stabilisierung in Emerging Economies wie der Türkei und Argentinien der Weltwirtschaft neuen Schwung geben könnte.

Doch der Hauptgrund der Stimmungseintrübung auf dieser Frühjahrstagung ist nicht wirtschaftlicher, sondern politischer Natur. Er liegt in der brachialen Machtpolitik, mit der die USA ihren Kandidaten David Malpass als Präsident der Weltbank durchgesetzt haben, wobei kein anderer Mitgliedsstaat protestierte oder auch nur einen Gegenkandidaten nominierte. Damit feiert jenes ‚Gentlemen’s Agreement‘ fröhliche Urständ‘, in dem sich die Hauptindustrieländer vor 75 Jahren darauf verständigt haben, dass die Weltbank jeweils von einem US-Amerikaner und der IWF von einem/r Europäer*in geführt wird. Bescheidene Reformhoffnungen kamen auf, als man sich nach dem Amtsantritt von Malpass‘ Vorgänger Jim Yong Kim darauf geeinigt zu haben schien, dass Auswahlverfahren künftig nach den Kriterien der Transparenz, der Qualifikation und Erfahrung der Kandidaten zu gestalten.
Ein krasseres Beispiel für ‚bad governance‘ an der Spitze einer internationalen Institution hätte man sich kaum vorstellen können. Dabei betrifft dies nicht nur das Procedere, wie die „Wahl“ von Malpass im Vorstand der Weltbank durchlief. Noch im Februar hatte die Regierung des Libanon mit Ziad Hayek einen Gegenkandidaten ins Rennen geschickt, diesen dann aber bald auf „politischen Druck“ anderer Regierungen hin wieder zurückgezogen. Malpass hat nicht nur eine schlechte Reputation, was wirtschaftliche Vorhersagen betrifft. In seiner Zeit bei der inzwischen bankrotten Bear Stearns-Bank hatte er kurz vor der Finanzkrise ein rosiges Bild gezeichnet und die Möglichkeit einer Großen Rezession zurückgewiesen. Es wäre schwierig, sich vorzustellen, dass die Suche nach einem qualifizierten Kandidaten mit einer Vision für die immer noch wichtigste Entwicklungsbank der Welt zur Nominierung des bisherigen Unterstaatssekretärs für internationale Finanzen David Malpass führen könnte, munkelten führende Kongressabgeordnete der Demokraten.
Was unter dem neuen Mann von der Weltbank zu erwarten ist, lässt sich schwer sagen. Die Spekulationen reichen von einer Abkehr von der Klimapolitik über eine noch stärkere Indienststellung der Bank für den privaten Sektor bis hin zur Instrumentalisierung der Kreditvergabe und eine konzeptionelle Umsteuerung gegen China. Keine dieser Perspektiven macht Lust, den in dieses Jahr fallenden 75. Jahrestag der Bretton-Woods-Zwillinge zu feiern.
Categories: Blogs

World Bank Financialization Strategy Serves Big Finance

Triple Crisis - 9 April, 2019 - 19:17

 By Jomo Kwame Sundaram and Anis ChowdhuryCross-posted at Inter Press Service.

The World Bank has successfully built a coalition to effectively advance its ‘Maximizing Finance for Development’ (MFD) agenda. The October 2018 G20 Eminent Persons Group’s (EPG) report includes proposals to better coordinate various international financial institutions (IFIs) in promoting financialization.

MDB Midwives of Financialization The MFD approach wants multilateral development banks (MDBs) to actively re-shape developing countries’ financial systems to better ‘complement’ global finance. MDBs have already urged developing countries to encourage local institutional investors by redesigning pension systems along lines inspired by US private pensions. Thus, MDBs have been: •    influencing what projects are deemed ‘bankable’, probably prioritizing large infrastructure over smaller projects. •    enabling securitization to transform bankable projects into tradable securities, generating more revenues and strengthening global finance. •    persuading developing country governments to finance subsidies and other ‘de-risking’ measures designed by MDBs to guarantee private financial profits. •    determining how developing countries supply securities preferred by transnational banks and institutional investors. G20 Financialization Proposals The main G20 EPG proposals for collaboration to promote financialization include: •    IFIs working together to increase the supply of bankable projects and to share data and information to support infrastructure data platforms needed to securitize MDB loans. •    IFIs should provide risk insurance to increase the number of bankable projects stuck due to high political risk. This requires government guarantees against ‘political risks’ to be more attractive to re-insurers. As securitization of MDB loans involves tradable assets with different credit ratings for investors with diverse ‘risk appetites’, MDBs are being urged to securitize both private and sovereign loans, and to retain stakes in junior tranches to induce private investments. MDBs No Longer Development Banks? While MDBs should follow recent advice for issuers to remain stakeholders by retaining shares of securitized tranches on their balance sheets, the implications are quite different when MDBs, and not private banks, securitize loans. As originators, MDBs may politically pressure low- and middle-income country governments to provide de-risking instruments, including guaranteed income from securitized public-private partnership (PPP) infrastructure projects. World Bank Guidance on PPP Contractual Provisions can burden states and citizens more than any trade or investment agreement or international law. States take on inordinate risk while its right to regulate in the public interest is fettered. New Washington Consensus? The Washington-based Center for Global Development (CGD) has similarly discouraged borrowing in its paper for the G20 EPG, ‘More mobilizing, less lending’. Instead, it proposes augmenting MDB private sector windows with special purpose vehicles (SPVs). The CDG also calls on MDBs to use sovereign lending to promote reforms to make projects financially viable and to help finance the public share of PPPs. Hence, MDBs are pressuring governments to support the MFD with their own fiscal resources. The recommendations will also make it more difficult to manage systemic vulnerabilities arising from the envisaged securities, repo and derivative markets to be officially promoted. Various options promoted by the CDG thus involve high risk, high leverage, financialized investors as partners in international development, exposing the MDBs themselves to the vulnerabilities of the MFD approach. Checks and Balances? The tendency towards concentration in asset management (with economies of scale and scope) is likely to result in US-based asset managers allocating finance globally using considerable institutional investments from developing countries. The G20 EPG is not unaware that its proposal — to transform developing country financial systems to contribute to the global supply of securities — involves significant systemic risks. Nevertheless, it claims to be seeking to secure the benefits of open financial markets while mitigating systemic vulnerabilities. Thus, it has called on the IMF to: develop and manage a framework for managing volatile capital flows; create a resilient global ‘safety net’ that can effectively mobilize resources to address financial fragilities; and integrate financial surveillance with an effective early warning system. However, the EPG paper does not make the shift to securitization conditional on mitigating systemic risks. As its proposed safeguards are largely unrealizable or ineffective, its financial instability concerns do not mean much. Although recognizing the dangers and vulnerabilities involved at both national and international levels, including the loss of effective sovereign control over financing conditions, the IMF supports the EPG proposals. Despite the experience of recent financial crises, the IMF continues to preach that freely floating exchange rates can effectively buffer capital flow volatility, while capital controls should only be used after exhausting all monetary and fiscal policy instruments. Anis Chowdhury, Adjunct Professor at Western Sydney University & University of New South Wales (Australia), held senior United Nations positions in New York and Bangkok.
Jomo Kwame Sundaram, a former economics professor, was Assistant Director-General for Economic and Social Development, Food and Agriculture Organization, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought in 2007.
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New Pan-Agency Development Financing Report Suggests Major Economic Crisis Brewing

Triple Crisis - 5 April, 2019 - 23:01

By Jesse Griffiths

Cross-posted at ODI.

The 2019 Financing for Sustainable Development report from the Inter-Agency Task Force (IATF) on Financing for Development was launched today.

For those – like me – who worry that the world is sleepwalking into another crisis, it’s not reassuring. It confirms that global debt is at record levels and ‘financial fragilities’ have built up across the globe. It’s also disappointingly light on solutions that could reverse these trends.

What is the IATF report?

The IATF is a group of fifty major international institutions that work on finance issues, including various United Nations bodies, the International Monetary Fund, World Bank and World Trade Organization.

This report is its annual stocktake on progress towards meeting commitments to finance the Sustainable Development Goals (SDGs). It’s an impressive undertaking, covering all major financing sources, with a mandate to look at the global financial and economic system as a whole.

Three things stood out to me:

1. Debt risks continue to grow

First, both public and private debt continue to grow in all country categories. As the graph shows, emerging economies should be particularly worried about corporate debt, which is close to 100% of GDP. This high level of debt makes these economies highly vulnerable – changes in the internal or external environment could trigger bankruptcies that could lead to a full-blown financial crisis.

Meanwhile, more than a decade after the global crisis, developed countries continue to have record levels of government debt. Clearly public finances in this group would be badly placed to weather any future crisis.

2. The financial sector is on shaky ground

Second, global financial sector risks are very worrying. The graph shows how the financial sector has ‘deepened’ – grown relative to the size of the economy – in all categories of countries since the turn of century.

This can be a good thing for developing countries, but it depends on the way that the financial sector has developed. The report highlights that developing countries’ financial sectors have internationalised, with international banks now making up 40% of their banking sector – a share which has doubled since mid-1990s.

This can bring advantages, but it also makes them more vulnerable to the international financial system, where risks have continued to grow despite reforms taken after the global crash. For example, the report notes that ‘th­e global stock of high yield bonds and leveraged loans has doubled in size since the global financial crisis, driven by low borrowing costs, high risk appetite, and looser lending standards.’

Reports like this are prone to understatement. One conclusion it draws is that ‘In the current uncertain environment, financial markets are highly susceptible to a sudden shift in investors’ perception of market risk, which could result in a sharp and disorderly tightening of global financial conditions.’

In other words, it wouldn’t take much to precipitate a crash. Add to this the fact that three quarters of countries are found not to have a financial sector strategy, and it’s beginning to look like a warning cry.

3. Solutions are lacking

Third, as might be expected from a report that is essentially a compromise between the differing perspectives of a wide range of institutions, recommendations on what to do to prevent another major crisis hitting the global economy are thin on the ground.

One key area I’ve highlighted before is what to do about the increasing risk of a widespread public or ‘sovereign’ debt crisis.

The report devotes a chapter to debt, and does mention some potential solutions. It has a section on the idea of making debt contracts dependent upon the ability of the debtor government to pay – known in the trade as ‘state contingent debt instruments.’ The idea of reducing the repayment burden when, for example, states face recessions or natural catastrophes is a good one, as a recent ODI report explores.

However, on the central issue of how to rapidly and fairly resolve debt crises that do occur – to prevent the lost years (and often decades) that can result – the report is spectacularly unambitious, saying only that it might be time to revisit this issue.

Perhaps I am expecting too much of a report produced by major international bureaucracies: the internal wrangling over each issue is likely to stymie creative, solution-oriented thinking.

The time is therefore ripe for others to pick up this baton and produce the companion set of solutions to help prevent or resolve the problems highlighted by the report, and ensure that the world can meet the ambition of the SDGs without suffering another major crisis.

Jesse Griffiths is Head of Programme at ODI and a specialist in development finance and the international development finance architecture. He has done work for a range of national governments, international organisations, non–governmental organisations and think–tanks, and has published widely on these topics.

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World Bank Financializing Development

Triple Crisis - 30 March, 2019 - 21:42

By Jomo Kwame Sundaram and Anis Chowdhury

Cross-posted at Inter Press Service.

The World Bank has successfully legitimized the notion that private finance is the solution to pressing development and welfare concerns, including achieving the Sustainable Development Goals (SDGs) through Agenda 2030.

A recent McKinsey report estimates that the world needs to invest about US$3.3 trillion, or 3.8 per cent of world output yearly, in economic infrastructure, with about three-fifths in emerging market and other developing economies, to maintain current growth.

The world financing gap is about US$350 billion yearly. If new commitments, such as the SDGs, are considered, the gap would be about thrice the currently estimated gap as available public resources alone are not enough. Thus, for the Bank, the success of Agenda 2030 depends on massive private sector participation.

Maximizing finance
The Bank’s ‘Maximizing Finance for Development’ (MFD) strategy marks a new stage. It presumes that most developing countries cannot achieve the SDGs with their own limited fiscal resources and increasingly scarce donor overseas development assistance (ODA).

Bank prioritization of financial inclusion presumes that fintech-powered digital financial inclusion would increase growth, create jobs and promote entrepreneurship in developing countries.

The MFD purports to respond to the G20’s April 2017 Principles of MDBs’ strategy for Crowding-in Private Sector Finance for growth and sustainable development. The G20 has offered the Roadmap to Infrastructure as an Asset Class for energy, transport and water inter alia.

The 2017 MFD strategy recycled the Bank’s 2015 Billions to Trillions: Transforming Development Finance, arguing that MDBs should increase financial leverage via securitization to catalyse private investment, thus promoting capital markets by transforming bankable projects into liquid securities.

The MFD presumes that public money should mainly be used to leverage private finance, particularly institutional investments, to finance the purported US$5 trillion SDG funding gap.

Financialization coalition 
The MFD strategy seeks to enable financialization and transition to securities-based financial systems in developing countries, complementing other initiatives by the Bank, IMF and G20. Such initiatives are expected to encourage investors to use environmental, social and governance criteria to attract, mobilize and sustain needed financing.

The MFD presumes that public money should mainly be used to leverage private finance, particularly institutional investments to finance the funding gap. Government guarantees are deemed necessary to ‘de-risk’ projects, especially for public-private partnerships (PPPs).

Meanwhile, the International Finance Corporation (IFC), a Bank subsidiary, is helping subsidize capital market involvement in infrastructure development; the MFD strategy envisages capital markets in ‘green bonds’, ‘social impact bonds’, infrastructure bonds and so on.

Securities markets are supposed to enable institutional investors to make desirable social and environmental impacts. MFD advocates claim that capital markets provide new solutions to development challenges such as inadequate infrastructure, and poor access to schooling, clean water, sanitation and housing.

The Financial Stability Board has also proposed measures to transform ‘shadow banking’ into securities-based finance, while the European Commission’s Sustainable Finance initiative seeks to similarly reorient institutional investors and asset managers.

Cascading financialization
The Bank’s ‘Cascade’ approach seeks to institutionalize this bias for private financing. It seeks to facilitate securities lending by enabling ‘repo’ market financing and hedging, and ‘rehypothecation’, i.e., allowing securities to be used repeatedly for new lending.

The Cascade approach seeks to accelerate financialization with measures to accommodate new asset classes, enable banks to engage in securities and derivatives markets with minimal regulation, deregulate financial institutions creating tradable assets from PPP projects, and facilitate capital flows ostensibly for development.

It presumes market imperfections and missing markets deter the private sector from financing sustainable development projects, and proposes to address such bottlenecks by ‘internalizing externalities’ and providing subsidies and guarantees to de-risk investments.

Tito Cordella notes that it prioritizes private finance even when a project is likely to be profitable if undertaken with public funds. He notes the tensions between maximizing private financing and optimizing financing for development, and some implications. Public options are only to be considered after all private options are exhausted or fail.

Thus, the Cascade approach presumes that the private sector is always more efficient, despite actual experiences. Clearly, it not only reflects an ideological preference for private finance, but also seeks to promote securities and derivatives markets, as market liquidity is among the core G20 Principles of MDBs’ strategy for crowding-in Private Sector Finance.

Hijacking development finance
The strategy would thus commit scarce public resources to ‘de-risking’ such financing arrangements to transform ‘bankable’ development projects into tradable assets. This means that governments will bear more of the likely costs of greater financial fragility and crises.

Such government measures will inadvertently undermine needed financial institutions such as development banks. There is no reason to believe that MFD will somehow create the capital market infrastructure to improve finance for SMEs or needed development transformations.

Once a project’s future revenue streams are securitized, the multilateral development banks’ environmental and social safeguards no longer apply. Contracts to repay securitized debt held by investors would be disconnected from the underlying project financed and its consequences.

Holders of these securities have no incentives to prioritize social or environmental goals. Private equity and hedge funds that have short-term incentives for profit-taking, including by asset-stripping, are not concerned with social, environmental or other public interests.

Not surprisingly, considerable doubt exists as to whether private capital markets and institutional investors can be incentivized to finance long-term public goods as these mechanisms serve the profit motive, not public welfare.

Anis Chowdhury, Adjunct Professor at Western Sydney University & University of New South Wales (Australia), held senior United Nations positions in New York and Bangkok.
Jomo Kwame Sundaram, a former economics professor, was Assistant Director-General for Economic and Social Development, Food and Agriculture Organization, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought in 2007.

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Fridays for Future – was wissen wir über diese neue Protestbewegung?

Klima der Gerechtigkeit - 26 March, 2019 - 15:20

Die CO2-Emissionen haben mal wieder ein neues historisches Hoch erreicht. Die Internationale Energieagentur (IEA) stellt fest: Aufgrund einer wachsenden Energienachfrage, stiegen die globalen Emissionen aus dem Energiesektor 2018 um 1,7 % auf 33,1 Gt CO2.

Doch diesmal kann man zum Glück sagen: das Thema stößt auf Interesse. Und es regt sich Widerstand!

Am 15. März fanden unter dem Motto #FridaysForFuture weltweit in 98 Ländern und an 1325 Orten Demonstrationen für mehr Klimaschutz statt. Allein in Deutschland waren es ca. 300.000 Menschen in mehr als 230 Städten.

Über die neue Bewegung ist viel geschrieben und gesagt worden – vor allem wird ihr viel unterstellt. Denn so richtig genau hingeschaut und gefragt hatte bisher noch niemand, wer sich denn da jede Woche versammelt und vernetzt. Wer sind die Teilnehmenden der Fridays for Future Proteste? Welche Anliegen und politisches Interesse haben die Protestierenden? Welche Wege der Rekrutierung und des politischen Engagements nutzen sie? Was sind ihre politischen Einstellungen?

Zusammen mit Protestforscher/innen aus Schweden, dem Vereinigten Königreich, den Niederlanden, Belgien, Polen, der Schweiz, Österreich und Italien befragten Forscher/innen des Instituts für Protest- und Bewegungsforschung am 15. MärzProtestierende in Berlin und Bremen.

Die ersten Ergebnisse dieser annähernd repräsentativen Befragung haben sie heute gemeinsam mit der Otto Brenner Stiftung, der Stiftung 100% erneuerbar und der Heinrich-Böll-Stiftung in Berlin vorgestellt.

Zusammenfassend kann man sagen

  • Es handelt sich zu einem Großteil um junge Menschen, die sich neu politisieren. Circa 30 % der befragten Schüler/innen geht zum ersten Mal auf eine Demonstration.
  • Es sind größtenteils gebildete Personen aus der Mittelschicht, die selber einen hohen Bildungsgrad haben (oder anstreben) oder deren Eltern einen besitzen.
  • Der Kontakt mit Freund/&innen ist ein wichtiger Weg der Mobilisierung.
  • Eine deutliche Mehrheit verortet sich im linken Spektrum, die Grünen bieten die stärkste Identifikation. Aber gut 40 % haben auch keine Parteipräferenz.
  • Der Protest wird als eine Art von politischer Selbstermächtigung verstanden. Zwar wird der Politik und den Unternehmen wenig Lösungskompetenz zugesprochen (da sehen die Jugendlichen viel mehr Handlungsspielräume und Möglichkeiten bei ihren eigenen Lebens- und Konsumstilen – Flugreisen, Energie- und Fleischkonsum etc.), fordern aber mit ihren Protesten ja genau die Politik auf, wieder Handlungskompetenz zu erlangen.

Barbara Unmüßig, Vorstand der Heinrich-Böll-Stiftung, macht noch einmal klar:

„Aus unserer Sicht haben auch und gerade Schüler und Schülerinnen jedes Recht der Welt, von ihren Grundrechten Gebrauch zu machen. Sie können ihr Demonstrations- und Streikrecht dazu nutzen, für ihre Zukunft auf die Straße zu gehen. Wir unterstützen gesellschaftspolitisches Engagement und die demokratische Willensbildung. Solche Demonstrationen sind eine wichtige ‚Schule der Demokratie‘ für die Jugendlichen. Aus der Befragung geht hervor, dass die Jugendlichen zwar sehr gut über den Klimawandel und die Ursachen der Krise informiert sind, aber trotzdem optimistisch in die Zukunft blicken. Diesen Zukunftsoptimismus und Wunsch nach Handeln darf die Politik nicht enttäuschen.“

Schade, dass sich die Debatte in den deutschen Medien bisher sehr stark auf die Frage nach „Streiken“ vs. „Schule schwänzen“ konzentriert hat. Mit der Vorstellung der heutigen Ergebnisse können wir uns hoffentlich endlich auf das Wesentliche konzentrieren, das die jungen Menschen zu Recht und lautstark einfordern – politische Lösungen.

Knapp 58 % der Befragten waren übrigens weiblich. Und über 50 % zwischen 14 und 19 Jahre alt (unter 14-Jährige dürfen in Deutschland nicht befragt werden bei solchen Untersuchungen).

Für diese junge weibliche Bewegung ist eine klare Vorbildrolle von Greta Thunberg (die am kommenden Freitag auch in Berlin dabei sein wird!) feststellbar:

 

 

 

 

 

Unterstützung bekommt #FridaysForFuture inzwischen nicht nur von den #ParentsforFuture, sondern auch auch von Hunderten von Wissenschaftler/innen. Scientists for Future schreiben in ihrer Stellungnahme:

„Zurzeit demonstrieren regelmäßig viele junge Menschen für Klimaschutz und den Er­halt unserer natürlichen Lebensgrundlagen. Als Wissenschaftlerinnen und Wissen­schaftler erklären wir auf Grundlage gesicherter wissenschaftlicher Erkenntnisse: Diese Anliegen sind berechtigt und gut begründet. Die derzeitigen Maßnahmen zum Klima-, Arten-, Wald-, Meeres- und Bodenschutz reichen bei weitem nicht aus. […] Die jungen Menschen fordern zu Recht, dass sich unsere Gesellschaft ohne weiteres Zögern auf Nachhaltigkeit ausrichtet. Ohne tiefgreifenden und konsequenten Wandel ist ihre Zukunft in Gefahr.“

Und auf die Frage, warum sie zum Protest gegangen sind, haben die jungen Menschen auch eine klare Antwort:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Categories: Blogs

China’s Belt and Road Initiative vs. the Washington Consensus

Triple Crisis - 26 March, 2019 - 14:24

Cross-posted at Inter Press Service.

With the Washington Consensus from the 1980s being challenged, President Donald Trump withdrawing the United States from the Trans-Pacific Partnership (TPP), and China pursuing its Belt and Road Initiative (BRI), most notably with its own initiatives such as the multilateral Asian Infrastructure Investment Bank (AIIB), the political and economic landscape in East Asia continues to evolve. Jomo Kwame Sundaram was interviewed about likely implications for developing countries in the region and beyond.

IPS: What do you think of world growth prospects and China’s Belt and Road Initiative?

Jomo: Although there are some hopeful signs here and there, there are few grounds for much optimism around the North Atlantic (US and Europe) for various reasons. Unconventional monetary policies, especially quantitative easing (QE), have helped achieve a modest recovery in the US, but appears less likely to succeed elsewhere. Such measures have also accelerated massive wealth concentration, which is why a few of the world’s richest men own more than the bottom half of the world’s population.

The situation is more promising in East Asia due to China’s diminished but sustained growth, and its almost unique rising labour share of national income. Most importantly for others, China has been willing to finance massive infrastructure projects, although this has given rise to a host of problems. For example, Chinese contractors are known for using Chinese material and human resources as far as possible, minimizing multiplier benefits for host economies. A few years ago, China’s ambassador to Tanzania publicly apologized for the conduct of Chinese firms in Africa, but most others tend to see all Chinese in monolithic terms. Meanwhile, US, European, Japanese, Indian and other competition for influence has helped increased options for other developing countries. However, it is not yet clear that China’s BRI and ‘alternative globalization’ will be enough to sustain rapid progress in the region.

Trade Liberalization?

IPS: You once said that “If President…Trump lives up to his campaign rhetoric, all plurilateral and multilateral free trade agreements will be affected.” Now, with the US having withdrawn from the TPP, why are the Japanese, Australians and Singaporeans still pushing for the CPTPP (Comprehensive and Progressive TPP) with all the others without the US?

Jomo: It must be emphasized that the US, the EU and Japan have done little to advance trade multilateralism and keep the promise of the Doha Round of World Trade Organization negotiations, flawed as they are against developing country interests. Meanwhile, the Japanese, Australians and Singaporeans are trying to hype up the CPTPP as a political counterweight to China. But as a trade agreement, it will not do much except to strengthen foreign corporate power and further weaken governments, e.g., through its investor state dispute settlement (ISDS) provisions.

IPS: Why will the CPTPP have little impact on growth, but will strengthen the power of foreign enterprises?

Jomo: Let us be clear that even with the original TPP, all projections, including the most optimistic ones by the Peterson Institute, projected very modest economic growth attributable to trade liberalization. US government projections were much more modest. About 85 percent of the Peterson Institute’s projected ‘growth gains’ were attributed to ‘non-trade measures’, mainly broadening and strengthening intellectual property rights (IPRs) and foreign corporate legal rights against host governments with its ISDS provisions, which they are promoting as features for so-called 21st century free trade agreements. So, for example, if stronger IPRs raise the prices of medicines, the value of trade will also rise! With ISDS, if a government decides to ban the use of a toxic agrochemical to protect farm workers and consumers for instance, it will have to compensate the supplier for loss of profits!

International Financial Institutions

IPS: Do you think the Washington Consensus is threatened by South-led financial institutions like the Asian Infrastructure Investment Bank and New Development Bank?

Jomo: Although still very influential, the Washington Consensus is acknowledged to have been superseded by new policy prescriptions. Despite recent ethno-nationalist Western reactions, all too many developing country governments still believe that further trade liberalization will boost growth. Meanwhile, financial globalization continues despite its adverse effects for growth, stability and equity.

Now, digital globalization is supposed to have wonderful progressive effects when it has clearly accelerated concentration of power and wealth, albeit with the rapid ascendance of innovative new players able to quickly consolidate lucrative monopolies.

I wish the new multilateral development banks would be bolder, but thus far, they have largely chosen to work within the dominant framework shaped by the Washington Consensus, probably to secure market confidence.

Credit from China’s banks, usually benefiting China’s corporations, is far more important than what the AIIB and NDB offer. Of course, lending by China’s banks has undermined the BWIs’ monopolies, and this has already been reflected by new policy initiatives by the West and Japan, e.g., to more generously provide infrastructure finance.

Meanwhile, the World Bank has aligned itself more closely with the UN’s Sustainable Development Goals in order to provide its new initiatives to promote market-based private finance such as securities and derivatives besides public private partnerships.

Capital Controls

IPS: You have pointed out that both portfolio investment inflows to developing countries have in recent years. Do you think it appropriate to resume capital controls, as Malaysia did during the 1997-1998 Asian financial crisis, to counter capital outflows?

Jomo: With even China reintroducing capital controls, it is important to consider such options. I have long advocated counter-cyclical ‘capital account management’ to smoothen financial cycles, rather than to only impose controls after a crisis, as effective capital account management must be pro-active, agile, and flexible.

Almost by definition, capital account management is context specific. There are few ‘one size fits all’ rules. What I specifically called for in the early and mid-1990s is probably no longer relevant or appropriate. The challenge is not to expect the last crisis to recur, but to protect national economic progress from likely future threats.

Capital inflows to sustainably enhance the real economy should be prioritized, not portfolio flows which tend to be speculative, easily reversible, and do not enhance the real economy.

Jomo Kwame Sundaram, a former economics professor, was United Nations Assistant Secretary-General for Economic Development, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought.

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Europe’s finest: what to learn from the old world’s unsung champions of climate protection

Energiewende Blog - 25 March, 2019 - 15:00

Germany is often cited as Europe’s renewable energy wunderkind, and indeed many of its laurels are well deserved. But it is no means alone on the cutting edge of climate protection, and indeed of late the Teutons have fallen behind in places. Other European countries excel in specific areas, offering best practices for the rest of the continent and beyond. In the final analysis, though, the meta-champion is the EU, says Paul Hockenos.

Wind turbines from a bird’s eye view (Public Domain)

Sweden: Gold Medal in Sustainable Development

Sweden is ranked number one in sustainability surveys, and on track to be the first nation worldwide to fulfill the UN’s SDGs, perhaps as early as 2030. Among its strongest suits is renewable energy – wind, bioenergy, hydroelectric – that accounts for more than half (55%) of gross energy consumption, followed by Finland (41%), Latvia (39%), Denmark (36%) and Austria (33%). It is determined to push up efficient energy use by 50% in the next decade and finish with a 100% renewable-energy supply in 2040. The newly re-elected leftist government should meet its target to achieve net zero greenhouse gas emissions by 2045.

Keys to Success: high level of citizen involvement, smart investment, engaged red-green national governments.

Portugal: Iberian Dark Horse

Last year in May, Portugal ran the country for three days in a row on renewable energy alone and even managed to export power during the streak. Little known even in Europe, Portugal has a higher share of fluctuating renewables in its supply than Germany, and steeper clean-energy growth rates, too. Renewables are expected to cover 80% of electricity consumption in Portugal in 2030, a goal that a massive, ongoing roll out of solar PV will help facilitate. According to The Portugal News, Green energy currently saves the country around €750 million in fossil fuel imports.

“The growth of renewables in Portugal is now so fast that officials are questioning planned investments in gas infrastructure,” says R. Andreas Kraemer of the Berlin-based think tank Ecologic Institute. The rapid shift to renewables has endowed Portugal with “a wealth of experience in the operational management of grid, including forecasting,” he says.

Keys to Success: Incredible natural resources, engineering prowess. Portugal has no fossil extraction industry.

Denmark : Wind Power Pioneer

Denmark, the cradle of European wind power, generates close to half of its electricity consumption (43.4%) from its stiff sea breezes.

Source: Dansk Energi

And the Danes’ security of supply is among the highest in Europe at 99.995%. Denmark is home to Europe’s largest wind turbine maker, Vestas, and the most sought-after offshore wind farm developer, Orsted. Vestas has installed over 60,000 turbines across 76 countries.

Keys to Success: Early pioneer in the field, wind galore, extensive district heating systems, dense crossborder grid.

United Kingdom: King of Offshore Wind Power

The U.K. is home to 39 of Europe’s 105 offshore wind parks with a total of 1,957 operational turbines. Since 2016, the U.K. has generated more power from the wind (sea- and land-based) than from coal, its traditional mainstay.

The five floating turbines at Hywind Scotland Pilot Park are the first of their kind in operation. Hywind’s turbines are about 253 meters in height, about a third of which is beneath the water. Each of the towers is tethered to the sea floor by chains weighing in 1,323 tons. At full capacity, the park will generate enough electricity to supply 20,000 homes.

Source: European Environment Agency

In 2017, the latest numbers available, the UK posted (in terms of absolute changes) by far the largest decrease in GHG emissions in the EU. The drop was a result of shifting from coal and natural gas to renewable energies. In relative terms, the largest decline happened in Denmark (5.3 %), followed by Finland (4.6 %) and the U.K. (2.6 %).

Keys to Success: a record 52% drop in coal use in 2016 followed by a further 19% decrease in 2017. U.K. has committed to end coal use by 2025. But also: many manufacturing facilities have moved overseas.

Norway: Future of the Fjords

The Norse capital of Oslo, and the rest of the country right behind it, is the hands-down world number one in electric transportation: half of all new car sales are electric or hybrid. And all new car sales should be zero emission by 2025 – the most ambitious goal in the world. Norway is also out in front on battery-powered shipping, a neglected sector until now. Its entire ferry fleet, which navigates the fjords and islands, is going electric, as are, more slowly, the larger tourist berths (see photo below of the electric catamaran Future of the Fjords.)

Downtown Oslo maintains that the only thing better than e-cars is no cars at all. The city center is largely car-free as of 2019, and apparently it’s working out fine, so far.

Oddly, Norway doesn’t have a car manufacturer today. The Nissan Leaf is the most popular all-electric automobile there.

Keys to Success: Strong environmental consciousness, deft civic planning, extensive green transportation infrastructure, lavish incentive scheme. Norway rewards e-car buyers with hefty rebates and other perks worth thousands of euros. Moreover, urban drivers can avail themselves to an array of perks such as free parking, access to bus lanes, and toll-free travel.

The European Union: The Most Unsung Champion

The EU has led the way on so many climate and energy issues that its impact over the years vastly outstrips that of any one state or region. Europe’s renewable energy boom, for example, is unthinkable without the EU’s opening of energy markets and the prying apart of energy production and distribution sectors (called “unbundling“) in the 1990s. In Germany, for example, the dismantling of the energy-market monopoly of four giant utilities paved the way for tens of thousands of small producers, citizen’s collectives, localities, and cooperatives to forge ahead with renewable energy generation, known as the Energiewende.

The EU has pushed hard on many fronts, such as the stubborn transportation sector, where its directives on lowering emissions for cars and trucks sets the bar in Europe (much to the consternation of Chancellor Merkel and German automobile manufacturers.)

Among the most salient measures of all, last year the EU agreed that renewables must make up 32% of energy consumed in Europe by 2030 (binding target) and that by there be a 33% increase in energy efficiency. Thanks to its targets and pressure – as well as communism’s fall and the financial crisis — the EU as a whole has already hit its 2020 goal of sinking greenhouse gas emissions by 20% (compared to 1990.) And the EU has pledged that from 2021 to 2027, every fourth euro of the EU budget — one trillion euros ($1.2 trillon dollars) — will go toward climate protection.

For Europeans concerned about climate change, and polls show it’s the vast majority, these are solid reasons to back pro-EU and climate-serious parties in the May European Parliament elections.

Categories: Blogs

Greening the New Deal

Triple Crisis - 22 March, 2019 - 21:24
By Shaun Ferguson (guest post)

The Green New Deal is desperately needed, and arguing about a price tag is like Henry Ford wondering if the country will be able to afford his brand new automobile.  With the introduction of a House Resolution by Rep. Alexandria Ocasio-Cortez (D-New York) and Sen. Edward Markey (D-Massachusetts), a debate has surged across the country on the affordability of the Green New Deal. The sheer distraction of the affordability discussion is enough to ensure that very few people will pay attention to what is really at stake. For when the bigger fish eat up this little fish we will need to remember how we got here and what matters most.  As the bright young critics have quickly observed, the Green New Deal could hardly be too green. Time is wearing thin and we need to make haste.

But there can be no greening that abstracts from political economy realities and while the tug of war taking place in the media at the moment is all about the so-called economy-of-it-all, there is next to no analysis on the political constraints of sustainably embarking on another New Deal when the first one withered away long ago. After World War II, the ambition of a nationwide spending program was quickly replicated on an international scale as the country rightly observed that in a vacuum the United States would be hard pressed to expand its economy and that what it needed to make large projects like the Tennessee Valley Authority which introduced unprecedented stimulus, sustainable in the long run was the integration of the United States capital stock’s capacity to produce output with a global trend of expanding markets.  Unless the United States comes to terms with the global characteristics of its (not to mention everyone else’s) economy, we will all the rest of us more than likely pay the brunt of another American adventure.  How does America exact these payments?  By imposing continued low growth trajectories, low wage growth,  contractionary balance of payments adjustments, and what Keynes called “forced exports”, which is basically what we call today narrow and specialized development: all opposed to diversification.

 

If the truth be told, the heavy handed unilateral approach of the United States renders the rest of the global economy akin to something that can be thrown off the back of a train to pay for America’s projects. By America’s choice, the world has pursued a most exclusionary development path with low growth trajectories being imposed on much of the world’s population, even Europe’s, to ensure the political dominance of one country, which itself is willing to sacrifice the high growth it could enjoy itself along with the rest of the world through inclusive multilateralism. The decision for this can be traced back to 1951, two years after what has sometimes been referred to as ‘the Kaldor Report’ was discussed at ECOSOC.  This would be the last serious consideration for institutionalizing Full Employment at the international level, which is to say that it was the last serious effort to institutionalize multilateral trading in support of an expansive global economy.

 

It is this author’s opinion that this would have required the mediatory institutions sought by John Maynard Keynes.  As he confided to his compatriots, “the difficulties are thoroughly shirked” (Keynes, 1980: 325), “The two Institutions have become different from what we were expecting.” (Ibid: 232)  These statements  commence a long line of lament by those working in the official institutions of international development.  Contrary to the less than exhaustive investigations by the most powerful parties involved in the post-War framing, certain extensive and earnest treatments of the rationale for full employment have been attempted.  The tensions that constituted the political sequence which framed the post-War economic institutions were all but resolved. They can fruitfully be resubmitted to thought.

 

The ability of the USA to pay for the Green New Deal is inherently connected to its relation to the global economy, at the broadest level. It can flounder on uninviting seas and when needed release its fury spanking the waves after Xerxes, or it can take stock of what Keynes called the “high ways of the real world”, and awake to the rough realities it has imposed around the globe. To the extent that America’s low growth trajectory displaces demand in the global economy— or to the extent that its low wage growth policy is the only way it manages to insert itself into the global economy, its longstanding policy of aggressive bilateralism will continue.  The world’s economies are intimately interlinked and what is needed is not an American scheme but a global one — which picks up the multilateralism that once wanted to be born.

 

Shaun Ferguson has worked in development economics at various United Nations agencies including UNCTAD, ESCWA and UNSCO since 2002. He has a doctoral degree in Economics at the New School for Social Research.

Categories: Blogs

#ExxonKnew – auch in Europa: morgen findet die erste Anhörung zur Klimalügenmaschinerie des Ölgiganten in Brüssel statt

Klima der Gerechtigkeit - 20 March, 2019 - 21:41

Am 21. März 2019 gibt es die erste öffentliche Anhörung zur Rolle von Exxon bei der Finanzierung von Klimaskeptikern und der Verhinderung effektiver Klimapolitikin Europa – undzwar im Europäischen Parlament. Aber Exxon selber wird nicht vertreten sein – der Großkonzern verweigert die Aussage.

Dabei ist die Lügen- und Lobbymaschinerie des Öl-Giganten (Stichwort #ExxonKnew) schon seit Jahren gut belegt und auch Inhalt verschiedener staatsanwaltschaftlicher Untersuchungen und Klimaklagen, vor allem in den USA.

#ExxonKnew – Hintergrund:

https://exxonknew.org/

https://www.smokeandfumes.org/

https://climateinvestigations.org/

https://exxonsecrets.org/html/index.php

Aus Anlass der anstehenden Anhörung in Brüssel hat Corporate Europe Observatory eine neue Recherche veröffentlich, die detailliert belegt, wie die Exxon-Lobby-Maschine in Europa funktioniert.

Climate Arson: The strategies and impact of ExxonMobil’s dangerous EU lobbying enthält auch konkrete Forderungen an die Europäische Kommission und das Parlament:

„Starting with removing their lobby badge, the European Parliament, in partnership with the European Commission, should systematically reduce ExxonMobil’s influence on EU climate and energy policy-making by:

  • Revoking the six Parliament access badges currently held by ExxonMobil lobbyists;
  • Preventing the company from participating in events held on Parliament or Commission premises;
  • Demanding the Commission exclude all ExxonMobil lobbyists from its expert groups;
  • Placing a moratorium on Commission officials and MEPs appearing alongside ExxonMobil at events;
  • Closing the revolving door between ExxonMobil and the EU institutions;
  • Restricting any interaction between ExxonMobil and MEPs, their staff and Commission officials involved in climate and energy policy-making to an absolute minimum.“

Praktische Infos zur Anhörung:

THE HEARING: The hearing will take place on Thursday 21 March, 10:30-12:30, European Parliament, József Antall building, Room 4Q1 (JAN4Q1), and will be live-streamed here. The draft agenda can be found HERE. To register and get access to the Parliament, please email your request stating your name, nationality, date of birth and passport number to peti-secretariat@europarl.europa.eu

PHOTO OPPORTUNITY: There will be a media stunt before the hearing with spokespeople on site, taking place at 09:30 at the Espace Simone Veil entrance of the Altiero Spinelli building of the EU Parliament.

PRESS CONFERENCE: After the hearing, Climate Science Historian Dr. Geoffrey Supran (Harvard University & MIT), MEPs Eleonora Evi and Molly Scott Cato, and Frida Kieninger (Food & Water Europe) will answer press questions at 13:00 at the Politikovskaya Room, PHS 0A50.

 

 

Categories: Blogs

The age of Czech solar power: after years of stagnation, is a rebirth imminent?

Energiewende Blog - 20 March, 2019 - 10:00

No other energy resource in the Czech Republic has been as discussed in the media and political debate as solar has been in recent years. The technology entered the Czech energy sector in 2010 with a big initial bounce, but its development stagnated during the next decade. Those interested in Czech photovoltaic technology are now attempting to revive it, says Martin Sedlák.

Within the economic potential, the installed capacity of solar plants could increase up to 3,5 GW in 2030 (Public Domain)

Czech photovoltaic cells – a wild history

Over the past decade, ministers of industry in the Czech Republic have alleged that solar has no potential and is expensive. However, a wave of interest in solar did come to the Czech Republic from the dynamic global developments in this unique technology – and the Czech system was not prepared. The first wave in 2009 sparked solar growth and was followed by exponentially increased growth in 2010. The Czech Republic suddenly had almost 2 000 MW of solar capacity installed.

This jump-start of growth was also projected into the cost of electricity, given that consumers in particular were paying for state support of solar. The problem was not how the amount of such support was set up. However, the Czech Republic had no aims for how many new renewable projects should be brought online per year.

Unfortunately, solar park owners became labeled as the culprits, and politicians began using the derogatory label “solar barons” for them in the media. Today this shorthand is exploited mainly by Czech President Miloš Zeman, but in the past it was also commonly part of statements made, for example, by the chair of the Energy Regulatory Authority. The main problem was, however, a mistake made by the regulation. However, nobody was looking for it there.

As a corrective measure, the previous administration pushed through a special solar charge, the so-called solar tax of 26 % imposed on installations dating from 2009 and 2010. The charge was to have applied for three years, during which project owners lost part of their state support. The charge was then extended for solar parks dating from 2010, set at 10 % for as long as they drew on state support.

Solar owners believed the measure was not just retroactive, but contradicted the aim of increasing renewables. However, their lawsuit failed before the Constitutional Court. Several international arbitrations are still underway.

The impact of these moves on solar has been merciless: Since 2011, no big solar projects have been implemented in the Czech Republic. What is annually growing is rooftop solar, with a capacity of 6 MW to date.

Support for small installations

2018 appears to have been slight promising: Rooftop solar growth has doubled year-on-year. During the first 11 months of 2018 there have been more than 1 500 applications for support paid out with a capacity of 6 MW.

From the perspective of new project growth in other European countries, the Czech example appears embarrassingly small. Nevertheless, domestically it appears to be a success after the years of decline. Firms performing installations now enjoy a predictable, stable environment. They are able to offer solar solutions for heating water, either alone or in combination with batteries or heat pumps. Families are able to request support for installations, depending on the type of system, that ranges from CZK 30 000 to CZK 150 000 (EUR 1 150 – 5 770) from the New Green Savings program.

Bigger projects of up to 1 MW of capacity can also be commercially implemented. The Czech Industry and Trade Ministry has already issued two calls through which firms can request investment into photovoltaic electricity generators. However, the condition is that the power generated be used directly on the firm’s own premises and that the equipment be installed on that particular building. During 2018 several projects on the order of hundreds of kilowatts have been built. Unfortunately, no other call has been announced and the companies are thus postponing their investments into renewables.

Opportunities for Czech solar have exponentially increased

The solar energy association has presented a study mapping the potential for solar in the Czech Republic. From its calculations, contributed by the renowned consultancy EGÚ Brno, it follows that there is technical potential for as much as 39 GW of solar. This includes opportunities to install panels on facades and rooftops as well as the building of photovoltaic electricity generation projects in brownfields. In total, this could mean up to 2,2 million solar systems (<10 kW) on rooftops and thousands of bigger installations

Within the economic (i.e. feasible) potential, the installed capacity of solar plants could increase up to 3,5 GW in 2030 and 5,5 GW in 2040.

For the repeated startup of such constructions, however, bigger solar projects in the Czech Republic lack two basic things: Good laws and political support. The Czech Industry and Trade Ministry is currently drafting an amendment to the law on state-supported energy. After about a year of debate with experts, a bill has been drafted to introduce auctions for new renewable projects, inspired by a German law which began a very interesting reduction to the costs of new projects there, especially for photovoltaic parks. However, the Czech Industry and Trade Ministry bill does not count on auction opportunities for new solar parks.

According to associations of modern energy professionals, the Czech ministry’s move makes no sense. In the associations’ view, the law should be neutral with respect to technology. Moreover, it is exactly solar that has the greatest chance of offering consumers cheap electricity, which would be advantageous.

The same ministry is pushing the Czech Government to support new nuclear reactors, which are exponentially less advantageous than solar for consumers.

Unfortunately, chances to build new solar parks, whether located in brownfields or on the grounds of spacious industrial campuses, are also not part of the Czech climate-energy plan the Government is meant to send to the European Commission by the end of the year to present its strategy for fulfilling its emissions-reduction obligations by 2030. According to the versions of the plan that have leaked to date, the Industry Ministry only wants to support solar projects with a capacity of 30 kilowatts or less.

Despite these small steps forward, the Czech solar energy sector is still waiting for somebody with a clear political vision to arrive on the scene. For the time being the Industry Minister, Marta Nováková, unfortunately remains behind the current energy trends.

Martin Sedlák is program director of The Modern Energy Union (Svaz moderní energetiky), the Union contributes to national debates in Czech Republic. He is as well an author for the Blog Aktuálne.cz.

Categories: Blogs

Gas wars part one: let’s be honest about Germany’s growing dependence on fossil gas

Energiewende Blog - 19 March, 2019 - 13:00

With the ink barely dry on Germany’s Coal Commission report recommending a phase out by 2038, the oil and gas industry is breaking out the champagne. While environmentalists criticize the plan’s particulars, the other side is celebrating the slaying of their strongest competitor. And they’re translating that joy into furious lobbying aimed at ensuring that renewables don’t fill the majority of the void as coal plants are shuttered. L. Michael Buchsbaum explains.

Fossil gas is essentially methane, which constitutes at least one-third of global warming (Public Domain)

Gas infrastructure set to expand in all directions

With the environmental community and media otherwise focused on the Commission’s report, in late January Chancellor Angel Merkel (CDU) addressed the 49th Annual World Economic Meeting and let the cat out of the proverbial bag: “if we phase out coal and nuclear energy, then we have to be honest and tell people that we’ll need more natural gas.”

Calling the growing tug-of-war over where that future gas supply comes from “a bit over the top,”she reassured the gathered industry and politicians that gas will “play a greater role for another few decades. We’re thus expanding infrastructure in all directions.”

Merkel’s candor and bluntness might be rather shocking for those more accustomed to her usual opaque pronouncements. But the fact that coal’s demise was really just a smokescreen for a gas play shouldn’t be a surprise for anyone who has followed the US’ rapid transition from billion-ton-a-year-coal-burner to the world’s largest oil and gas producer. As new technologies came into play, beginning in 2005, fracking companies there covertly funded the nascent “Beyond Coal” movement, directly or indirectly, while ensuring the media labeled fossil gas as a natural bridge fuel to renewables.

It was a very successful campaign, as evidenced by the fact that today coal is slipping to only 25% of total US electrical generation, as gas closes in on 40%. Its meteoric growth has always been framed as clean energy, blunting the demand for non-hydro renewables, which have been politically fenced in to only 10% of total capacity.

The German playbook’s version similarly calls for bottling up burgeoning wind and solar capacities to about 50% and then ensuring that gas takes up the capacity that coal will eventually leave behind.

The “gas bridge” scam

One of the key components of this play is repeating ad nauseum that burning fossil gas produces only half as much CO2 in comparison to hard coal or lignite, the most polluting of all coals. Until recently, little media attention was given to the fact that fossil gas is essentially methane, which constitutes at least one-third of global warming and is leaking into the atmosphere all across the gas production and delivery chain. According to the Intergovernmental Panel on Climate Change (IPCC), in the first 20 years after its release, methane causes an approximately 87 times greater negative climate effect in the atmosphere than CO2. For a period of 100 years, the climate effect would still be 36 times greater compared to CO2.

In order for the world to meet its Paris-pledged goals of ensuring less than a 1.5 degree temperature rise, gas usage will have to decrease slightly through 2025 and decrease sharply thereafter. But that’s nowhere near current trends.

Instead, throughout the US, 60 percent more fugitive methane was being released into the atmosphere through leaky oil and gas production than previously measured, the journal Science reports. In retrospect, when “including methane emissions released during production and transport, in particular the massive fracking emissions which have quickly increased, natural gas is no better than coal,” said climate researcher Niklas Höhne of the NewClimate Institute in Cologne in an interview with Germany’s Deutsche Welle. “If all emissions are considered, natural gas could actually be worse,” he said.

Germany’s Federal Environmental Ministry (BMU) came to this same conclusion as well (in German here). “We assume that natural gas imported by fracking and imported by LNG (liquefied natural gas) will generally not reduce greenhouse gas emissions compared to coal,” stated BMU to DW. While piped-in gas from Russia might be a bit better compared to LNG, the country barely has any fugitive methane controls, and is the leading producer and shipper of gas to Europe and Germany.

Don’t let gas cut out renewables

Sitting in the middle of Europe, Germany is already the world’s largest importer of fossil gas. Though only partially used for generating electricity (about 13% of total), its historically high prices lead many energy experts to assume that it won’t be able to compete with ever-cheaper renewables and take over the space left behind as coal is phased out.

But current trends indicate that green energy expansion is in fact, being deliberately fenced in. While on and offshore wind expansion slows, Nordstream 2 and a plethora of other new pipelines from Russia and newly discovered gas fields in the Middle East as well as the construction of a fleet of new LNG ships and terminals are set to flood the European gas market, dropping gas prices dramatically.

Thereafter, cheap gas will enable a business case for simply switching from one fossil fuel to another, allowing existing under-utilized gas plants more generating capacity and convincing lenders to finance more retrofits of coal plants or the building of new “cleaner” gas plants. Once that infrastructure is built, fossil gas use “will only be prolonged, ensuring it’s harder for renewable energies” to expand said Green Bundestag member Julia Verlinden.

Under this scenario, German gas usage could actually rise by up to 8 percent through 2022 alone according to gas lobbying group Zukunft Erdgas. Coal currently provides about 40% of total capacity. As the first cuts take place under the Coal Commission’s plans by 2022, the gas industry is already planning on jumping into that space.

Likewise, executives at utility Uniper, Germany’s single biggest customer of imported Russian gas and a partner in the Nordstream2 pipeline and various LNG terminal projects, are assuming “that there will be additional gas import demand of 150 billion cubic metres per year by 2030 in Europe,” chief financial officer Christopher Delbrueck said at a news conference on the presentation of the company’s 2018 earnings. Evident of the new gas rush: shipments of U.S. liquefied natural gas (LNG) have also increased through March following Russia’s record gas flows to Europe in 2018.

So why again does anyone wonder why school kids throughout Europe and worldwide are striking for the future climate?

Categories: Blogs

Promoting Privatization

Triple Crisis - 18 March, 2019 - 17:09

Cross-posted at Inter Press Service.

By Jomo Kwame Sundaram

Privatization has been central to the ‘neo-liberal’ counter-revolution from the 1970s against government economic interventions associated with Roosevelt and Keynes as well as post-colonial state-led economic development.

Many developing countries were forced to accept privatization policies as a condition for credit or loan support from the World Bank and other international financial institutions, especially after the fiscal and debt crises of the early 1980s. Other countries voluntarily embraced privatization, often on the pretext of fiscal and debt constraints, in their efforts to mimic new Anglo-American criteria of economic progress.

Demonizing SOEs

Globally, inflation was attributed to excessive government intervention, public sector expansion and state-owned enterprise (SOE) inefficiency. It was claimed, with uneven and dubious evidence, that SOEs were inherently likely to be inefficient, corrupt, subject to abuse, and so on.
In the 1970s, the motives of many involved in the preceding public sector expansion – enabled by high commodity prices and earnings as well as low real interest rates due to easy credit, with the need to ‘recycle petro-dollars’ (invest revenues from petroleum exports) – were developmental and noble.

Regardless of their original rationale or intent, many SOEs become problematic and often inefficient. Yet, privatization is not, and has never been a universal panacea for the myriad problems faced by SOEs.

Only more pragmatic and appropriate approaches — recognizing their origins, roles, functioning, impacts and problems — can realistically expect to address and overcome the burdens they have come to impose on many developing economies.

Various meanings

Privatization usually refers to a change of ownership from public to private hands. Over recent decades, the term has been used more loosely. For example, it may only involve minority private ownership after the corporatization of an SOE, and the sale of a minority share of its stock, or even a majority share with control remaining in state hands by various means such as the use of a ‘golden share’.

It sometimes also refers to contracting out services previously undertaken solely by the government. The definition may include cases where private enterprises are awarded licenses to participate in activities previously reserved for the public sector.

Strictly speaking, however, privatization involves the transfer of at least a majority share of and a controlling interest in a public enterprise or SOE and its assets, or an entity (such as a government department, a statutory body or a government company) previously controlled and typically at least majority-owned by the government, either directly or indirectly.

Mainstreaming privatization

Following the oil price shocks of the mid- and late 1970s, inflation spread through much of the world. US President Jimmy Carter appointed Paul Volcker as Chairman of the US Federal Reserve in 1980. The US Fed sharply raised interest rates to stem inflation, which precipitated the fiscal and debt crises of the early 1980s in many parts of the world, especially in Latin America, Africa and Eastern Europe.

The unexpected sovereign debt crises forced many countries to seek emergency financial support from the International Monetary Fund (IMF) and the World Bank (WB), both headquartered in Washington, DC. The IMF provided emergency credit facilities requiring (price) stabilization programmes to bring down inflation, typically blamed on ‘deficit financing’ due to ‘macroeconomic populism’.

Generally, the WB worked closely to provide medium- and long-term credit to these governments on condition that they adopted structural adjustment programmes (SAPs). The SAPs generally prescribed economic globalization (especially of international trade and finance), national (or domestic) deregulation and privatization.

Since then, these international financial institutions have been more powerful in relation to developing countries than ever before. Soon, privatization became a standard requirement of SAPs. Thus, many governments of developing countries were forced to privatize by the SAPs’ loan conditions.

Many other governments voluntarily adopted such policies which became standard pillars of the emerging ‘Washington Consensus’ associated with the WB, the IMF and the US policy consensus of the 1980s. Privatization in developing countries was preceded by the political ‘counter-revolution’ associated with the rise and election of Margaret Thatcher as the Prime Minister of the United Kingdom and Ronald Reagan as the President of the United States of America.

Jomo Kwame Sundaram, a former economics professor, was United Nations Assistant Secretary-General for Economic Development, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought.

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